What would happen to the price and quantity of a good if the government imposed a subsidy?

This would be a perfect opportunity to use a diagram to demonstrate how with the imposition of a subsidy, the supply curve will shift to the right to show the fact that more firms can now sell the product once the government has provided them with a subsidy to lower the cost of production for these firms. In this event, and it will be a lot easier to show with the help of a diagram, the price of the good in the market would fall to another equilibrium demonstrating the fact that more firms are in the market pushing the price down and the amount of the good sold would increase due to the fact that the new lower price means more consumers can afford the good. Therefore, to summarise, with the imposition of a subsidy, the price of the given good falls and the quantity consumed increases.

MJ
Answered by Mihir J. Economics tutor

1655 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Evaluate policies which a UK government could use to control the activities of oligopolists. (25 marks)


Why is the concept of the “marginal “ so important in economics?


In November 2017, the Bank of England raised interest rates for the first time in 10 years, increasing the base rate from 0.25% to 0.5%. Please highlight a possible effect of this change on Aggregate Demand in the UK's economy.


Explain how a change in Government spending may affect the average price level and real GDP


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences